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Unenforceable Terms of Use will leave your business at risk

Most websites contain Terms of Use intended to limit permissible behavior by the website’s users and to manage legal risks from any user interaction with the website, including liability for data breaches. This is typically accomplished through restrictions on use, warranty disclaimers, user indemnity obligations for intellectual property infringement, limitations of liability, and arbitration clauses.  Terms of Use may therefore be an effective tool for managing the relationship between a company and the users of its website.

Companies generally seek to obtain consent to the Terms of Use by presenting them either as a clickwrap agreement or as a browsewrap agreement.  Clickwrap agreements require the user to take an affirmative step to consent to the Terms of Use; typically by clicking on an “I agree” box after being electronically presented with the Terms of Use.  Browsewrap agreements do not require the user to take any affirmative step to consent to the Terms of Use; instead such are made available by a link on each page of the website and state that use of the website signifies the user’s consent to the Terms of Use.

Terms of Use presented as a browsewrap agreement are widely used, but a recent decision by the Court of Appeals for the 9th Circuit in Nguyen v. Barnes & Noble, Inc. demonstrates an increasing judicial reluctance to find some browsewrap agreements enforceable. The decision holds that Terms of Use are only enforceable where the user actually consents to the Terms of Use or has constructive notice thereof.[1]  Constructive notice means that a user is deemed to have knowledge of the Terms of Use if a reasonable person would have been aware of their existence.  Unless consent is obtained through actual knowledge or constructive notice, an enforceable contract—requiring an offer, acceptance, consideration, and mutual consent to the material terms—cannot be formed.

Barnes & Noble and Zappos.com, among others, have learned this lesson the hard way by losing the provisions in their Terms of Use intended to manage their legal risks.[2]  As a result, unenforceable arbitration clauses and the loss of limitations of liability permitted class action lawsuits with unlimited liability for claims of breach of contract and breach of data security.

These invalidated browsewrap agreements share one common flaw: the placement of a link to the Terms of Use at the bottom of each webpage did not provide sufficient notice that use of the website constituted consent to the Terms of Use.  Such instances include where a user must scroll down in the browser window to find the link, and where the link is placed next to other links in the same font type, size, and color.

The risks associated with unenforceable Terms of Use are therefore entirely preventable if a company acts to obtain the consent of its users through a clickwrap agreement or provides actual or constructive notice of the Terms of Use through prominent notice of a browsewrap agreement.

Clickwrap agreements are easily created where a user makes a purchase, downloads content, or creates an account through a website. In each instance, the user can be bound by the Terms of Use by taking an affirmative step to consent to the Terms of Use; typically by clicking on an “I agree” box after being electronically presented with the Terms of Use.  In addition, where a website provides access to proprietary content without requiring purchase, download, or account creation, a company should consider implementing a clickwrap agreement through a pop-up window requiring the user to take an affirmative step to consent to the Terms of Use by clicking on an “I agree” box after being electronically presented with the Terms of Use. 

If a pop-up window is not desired, the link to the website’s Terms of Use should be conspicuous and provide prominent express notice that use of the website is subject to the Terms of Use.  Based on the guidance provided by the courts, this may likely be accomplished by placing the link within a view that does not require the user to scroll down in the browser window, by using font type, size, and color that clearly sets the link to the Terms of Use apart from other content, and by including express words next to the link that all use of the website is subject to the Terms of Use.

Nguyen v. Barnes & Noble, Inc.demonstrates the increasing judicial reluctance to enforce browsewrap agreements absent proof of the user’s actual consent to the Terms of Use or constructive notice of the Terms of Use.  The best practice for ensuring enforceable Terms of Use is to require affirmative conduct to show consent by each user.  It is a simple step compared to the potential risk of unlimited liability resulting from a data breach, the unavailability of a breach of contract claim against a user, or the inability to compel arbitration.


[1] Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1177-79 (9th Cir. 2014).

[2] See Hines v. Overstock, 380 Fed. App’x 22, 24–25 (2d Cir. 2010); Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 28–35 (2d Cir. 2002); In re Zappos.com, Inc., 893 F. Supp. 2d 1058, 1063–65 (D. Nev. 2012); Van Tassell v. United Mktg. Grp., 795 F. Supp. 2d 770, 790–93 (N.D. Ill. 2011); Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927, 936–37 (E.D. Va. 2010).